American Airlines files for bankruptcy

City A.M. Reporter
American Airlines and its parent company AMR filed for bankruptcy protection after failing to win a deal with pilots earlier this month to pare its labour costs.

AMR had been the only major US carrier to avoid bankruptcy proceedings in the past decade, a move its rivals had used to restructure their labour agreements and cut costs.

That left AMR, the third-largest US airline behind United Continental Holdings and Delta Air Lines, with the highest costs in the industry, and the only major airline that still must fund worker pensions.

The airline said last month it was also suffering from soaring fuel prices that sent its costs 40 per cent higher in the third quarter from a year earlier.

AMR also on Tuesday named Thomas Horton as its chairman and chief executive, replacing Gerard Arpey, who retired, the company said in a separate statement.

Under its Chapter 11 filing in a New York court, the company listed assets of about $24.72bn (£15.82bn), while it has liabilities of $29.55bn. The company said it has $4.1bn in cash.

AMR said both American Airlines and American Eagle are expected to fly normal schedules throughout the Chapter 11 process.

"We plan to initiate further negotiations with all of our unions to reduce our labour costs to competitive levels," CEO Horton said.

AMR's top rivals, UAL Corp and Delta Air Lines, which both used bankruptcy protection to slash costs, have since found merger partners -- Delta bought Northwest Airlines and UAL Corp bought Continental Airlines to form United Continental Holdings.

AMR has been in labour talks with its pilots for five years, and a wave of pilot retirements in October had prompted speculation the airline was nearing a bankruptcy filing.

Some industry watchers believed the pilots chose to retire to lock in pension values that may now be in jeopardy as the company moves through bankruptcy court.

The company said the bankruptcy has no direct legal impact on operations outside the United States and it was not considering debtor-in-possession financing.

It said Weil, Gotshal & Manges LLP is lead counsel on the case.